Skip to content

Contract researchers cringe as Glaxo to cut use by 25%

July 29, 2017

On Wednesday, GlaxoSmithKline (GSKprovided information about its second-quarter financials. The attention focused on plans to kill more than 30 preclinical and clinical programs and allocate 80 percent of its research-and-development budget to respiratory and HIV/infectious diseases. But a closer look at the new chief executive officer, Emma Walmsley’s plans, point to big changes in the company’s manufacturing network as well.

In a conference call with stakeholders, Walmsley said, “The biggest change in our company is going to be felt across our pharma business.”

Over the next three years it plans to reorganize its entire operations. GSK plans to withdraw support over time for its diabetes drug Tanzeum and wrap up a collaboration with Johnson & Johnson (JNJ) over sirukumab for rheumatoid arthritis.

The company recently made the decision to sell off the UK portion of its Horlicks malted milk beverage company. Sales have slowed in the UK, but is still popular in India. It plans to sell off its MaxiNutrition sports drink brand. As part of its restructuring, GSK has halted plans for a biopharmaceutical manufacturing facility in Cumbria, UK. It is also reviewing the possibility of selling its antibiotics business located in Ulverston, UK. The plant makes antibiotics such as Zinnat, Zinacef, and Fortum. It also has indicated it is selling manufacturing facilities in Verona, Italy.

Walmsley said at the conference, “Simplifying our portfolio is a key enabler of improving our network efficiency. In the next 12 months, we expect to divest more than 130 non-core tail brands within pharma alone, brands that could create complexity for our supply chain. Overall, we’re looking for 22 percent reduction in the number of pharma brands we have.”

The termination, partnering or divesting of 13 clinical candidates and about 20 preclinical programs has been noted already, but Walmsley also said, “We’re also looking to reduce our overheads in manufacturing across the whole group with a simpler network that improves productivity, and we will reduce our supply base in manufacturing by 25 percent by 2020.”

This is a step that’s likely to have contract manufacturing organizations (CMO)’s sitting up and taking notice. Although cutting back on in-house manufacturing would suggest an emphasis on CMOs, the sense is that GSK is looking to make more revenue with fewer products and lower costs. That’s not an aggressive strategy, but it’s a logical one, even if it feels conservative and defensive. And it’s likely to significantly reduce manufacturing costs in-house and externally. It’s also likely to create significant job losses, although that has not been addressed yet.

Walmsley said, “We’ve already announced plans to reduce offsite network across the group by nine sites and we’re continuing to review and look for further opportunities to simplify the network in coming years where it makes sense.”

In a report in 2016, GSK indicated it had 87 manufacturing facilities across its pharmaceuticals, vaccines and consumer healthcare business. They employed over 38,600 people globally.

The company’s changes to its pipeline is more obviously dramatic, but changes to its supply chain and manufacturing will have a big effect on costs as well. Still, the focus is likely to be more on changes to its pipeline and the reconfiguring of GSK’s research-and-development operations.

Dividend Drive, a UK investor writing for Seeking Alphawrote, “Emma Walmsley has made a bold push towards forming a clear new vision for GSK under her leadership. It takes a strong lead from what others have achieved at similar businesses, and this is good in many ways. It is a tried and tested method. Yet, the pharma business—which is still very much GSK’s core—is a very different beast to consumer healthcare. Whilst consumer healthcare’s growth rises and falls on its innovation to some extent, pharma’s survival rises and falls on its innovation entirely.”

http://bit.ly/2vayA1t

Advertisements

From → Uncategorized

Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: